To ensure that Congress will pass more reforms needed to secure an “A” rating for the hilippines, the economic managers will work closely with lawmakers for the passage of Duterte administration’s priority bills. However, they want Congress to go slow on bills creating new economic zones.
During the 2020 budget briefing of the Development Budget Coordinating Committee (DBCC), Socioeconomic Planning Secretary Ernesto Pernia asked Congress to pass 11 emerging key policy reforms of the government.
According to Pernia, continuing the fiscal reforms would be a good start in setting in motion this close collaboration between the two branches to ensure that the Philippines gets a good chance of getting an A credit rating in two years.
Pernia lobbied for the passage of the four remaining tax-reform packages, Budget Reform Bill, amendments to Public Service Act, amendments to the Foreign Investment Act, amendments to Retail Trade Act and amendments to the Build-Operate-Transfer law.
He also asked for the passage of the National Competition Policy, Department of Water and Water Regulatory Commission, National Land Use Bill, Disaster Resiliency Bill and National Quality Infrastructure.
Besides ensuring that Congress pass more game-changing reforms, the economic managers, however, also underscored the need to guarantee fiscal discipline.
“This means taking a strong position on what is not in the best interest of the people as a whole,” said the economic team in a joint statement.
147 bills
In the 17th Congress, the economic managers said 147 bills were proposed that collectively would either erode revenues by P178 billion or mandatorily add P799 billion to the budget, or a total of P977 billion, which the government cannot afford.
“While some bills seek to benefit some sectors, they take away money from millions of other poor and jobless people who also deserve our help,” they said. The team also noted the 31 bills creating more tax-free free ports or ecozones, adding to the 546 the country already has as of 2017.
“Many of these ecozones contribute to massive revenue leakages and the assorted incentives they grant are subsidized by taxpayers,” they said.
In the recent meeting between the executive and the legislative, government economists are asking the House of Representatives and the Senate to go slow in creating new economic zones.
In a joint letter to Senate President Vicente Sotto III and Speaker Alan Peter Cayetano, the economic managers said too many ecozones leads to leakages of up nearly 3 percent of the country’s GDP in terms of grant of tax incentives.
The letter was signed by Pernia and then DBM Officer in Charge Janet Abuel, who has been replaced by Secretary Wendel Avisado.
They said the creation of more tax-free zones does not guarantee economic success.
In 2017, economic managers said tax incentives reached P441 billion or 2.8 of GDP or 17 percent of national government expenditures. “Before considering any bill that proposes to create more zones, we recommend that at the minimum, there should be a master plan and cost benefit analysis to identify which areas in the country would benefit from such zones, and which activities in these zones should be supported,” the letter added.
As of Thursday, 14 bills have been filed creating economic zones in different parts of the country.
Earlier, President Rodrigo Duterte issued Administrative Order 18 suspending the processing of applications for ecozones in Metro Manila in a bid to spur rural progress through development of special economic zones in the countryside.
Under Administrative Order 18 signed on June 17, the President likewise ordered different government agencies to hasten human capital and infrastructure development, as well as to provide needed interventions to strengthen ecozones in the countryside so as to ensure the development of backward and forward linkages of industries in and around such ecozones.
For his part, Ways and Means committee Chairman Joey Salceda said the House will fast track the deliberation of the Corporate Income Tax and Incentive Rationalization Act (Citira) bill. The measure seeks to encourage in-vestments by bringing down the corporate income tax rate from 30 percent to 20 percent and modernize investment tax incentives to enhance fairness, improve competitiveness, plug tax leakages and attain fiscal sustainability.
Ledac
Meanwhile, the economic managers also proposed holding informal or technical-level meetings of the Legislative-Executive Development Advisory Council (Ledac) more often to ensure better working relations with lawmakers.
They also underscored “the need for more clarity on the basis where the executive can support bills with fiscal or economic implications” to manage the expectations of lawmakers on such measures.
“The DOF, DBM and Neda look forward to working more closely with the 18th Congress, under your leadership, to better align the priorities of the legislature with the President’s development agenda,” they said.
“This is to ensure that we can move our country forward and achieve our Ambisyon Natin 2040 objective of becoming a high-income country where poverty is eradicated,” the economic managers added.
Image credits: Nonie Reyes